The world of cryptocurrencies is abuzz this week with scheduled token unlocks for the liquid staking protocol Lido (LDO), the Avalanche Blockchain's native token (AVAX), and the token behind the Yield Guild Games DAO (YGG).
But what are token unlocks and how do they impact the market?
Understanding Token Unlocks
Token unlocks refer to the staggered release of previously frozen coins. These tokens are typically kept under lock to deter early investors or project team members from making a sudden, large-scale liquidation of their assets.
The unlock increases the supply of tokens in the market, potentially leading to price fluctuations.
Lido DAO (LDO) unlock
Lido is gearing up for an unlock of 8.5 million LDO tokens on August 26. Valued at a $14.2 million, this unlock represents about 0.97% of the token's total supply.
All of these tokens are earmarked for investors, augmenting their holding of over 300 million tokens.
Over the past week, LDO has seen an 8.5% drop, though it has shown stability in the past day.
Avalanche Token (AVAX) Unlock
Avalanche's native token, AVAX, has an unlock set for August 26. The unlock will release 9.54 million AVAX tokens, equivalent to $102.86 million or 2.77% of its total circulating supply. This isn't the token's first rodeo; a previous unlock in May was seemingly well-received by the market.
Lindsey Winder, CEO of Hedgey Finance, previously noted to CoinDesk that token unlocks might concern many, but the planned Avalanche unlock has been on the radar for sophisticated market participants.
Interestingly, the AVAX unlock is destined for various recipients: strategic partners will receive 2.25 million tokens, the Foundation gets 1.67 million, the project team has 4.5 million tokens allocated, and airdrop participants will obtain 1.13 million tokens.
Recently, AVAX experienced a 13% dip over the past week and is down by 1.8% on the day.
Yield Guild Games (YGG) Token Unlock
Yield Guild Games, a prominent investor in GameFi's DAO tokens, has a token unlock planned for Sunday. This unlock will release 12.2 million YGG tokens, approximating $2.87 million or 6.6% of the crypto's circulating supply.
Despite the recent rally that saw a 49% increase, YGG’s token has had a tumultuous year, plunging by almost 59%. In the last week, it further shed 30% of its value.
Token unlocks and their effect on market prices
The relationship between token unlocks and market prices is intricate. While the common belief is that unlocks may drive prices down, the reality isn't as straightforward.
In a study conducted by analytics firm The Tie, which examined over 350,000 unlock events, the data revealed a trend: coins usually experience a dip leading up to the unlock event. But if the released liquidity surpasses 100% of the average daily volume, prices bounce back momentarily, only to fall once more within a fortnight.
